ABSTRACT: While several studies have examined the effects of cartels, in few
instances are data available that allow us to examine postcartel
behavior. In this paper, I use data on interisland airfares to examine
the effects of an antitrust immunity agreement that allowed two airlines
to coordinate capacity for a limited period of time. I find not only
that prices rose during the period of coordination but that they
remained high until the entry of a new competitor, 2
years after immunity expired. That the incumbent airlines were able to
sustain supracompetitive fares well past the end of immunity suggests
that even short‐lived grants of immunity can have persistent effects.
Policymakers should view even temporary grants of immunity with great
skepticism, particularly in markets that already exhibit characteristics
that may facilitate coordination.

ABSTRACT: This paper examines the relationship between competition, innovation and productivity for the Netherlands. We use industry level data aggregated from micro data as well as moments from firm level data for the period 1996-2006. We match innovation data from Community Innovation Survey with accounting data to link innovative activities with performance at the industry level. We find strong evidence for a positive impact of competition on Total Factor Productivity (TFP) at the industry level. Competition directly increases TFP by reducing X-ineficiencies and removing inefficient forms from markets, but also through more innovation. Nonetheless, there exists an inverted U- curve between competition and innovation for the Netherlands, at least for manufacturing industries. Yet, our results indicate that a negative effect of competition on productivity through lower innovation expenditures arises only at very high levels of competition.

If a product has two dimensions of quality, one observable and one not, a firm can use observable quality as a signal of unobservable quality. The correlation between consumers' valuation of high quality in each dimension is a key determinant of the feasibility of such signaling. A firm may use price alone as a signal, or price and quality together. Both signals tend to be used when the market is very uninformed, whereas price signaling alone tends to be used when the market is moderately informed. If high observable quality is inexpensive to provide, then it cannot signal high unobservable quality, and low observable quality is always an indication that unobservable quality is high.

ABSTRACT: We model a player's uncertainty about other players' strategy choices as smooth probability distributions over their strategy sets. We call a strategy profile (strictly) robust to strategic uncertainty if it is the limit, as uncertainty vanishes, of some sequence (all sequences) of strategy profiles, in each of which every player's strategy is optimal under under his or her uncertainty about the others. We derive general properties of such robustness, and apply the definition to Bertrand competition games and the Nash demand game, games that admit infinitely many Nash equilibria. We show that our robustness criterion selects a unique Nash equilibrium in the Bertrand games, and that this agrees with recent experimental findings. For the Nash demand game, we show that the less uncertain party obtains the bigger share.

ABSTRACT: The need for a supra national model which embraces and provides for social rights of individual Member States is becoming more apparent amidst the ever intensifying integration process within the EU and its involvement in areas which have been undermined by an economic model. This paper considers why, despite such a need for a supra national model, the “ordo liberal European polity” is favoured. It partly does so, by way of reference to two judgements from the European Court of Justice (ECJ) – namely, Laval un Partneri Ltd , and the Viking Cases. Can competition rules (during and beyond periods of financial crises) be designed and implemented in such a way whereby the facilitation of the aims and objectives of the EU Internal Market are optimally realised? To what extent can such rules be reconciled with the all paramount and more highly prioritised goal of sustaining economic and financial stability? Further, to w! hat extent should competition rules be given due prominence – particularly during chronic periods of financial crises? To what extent should competition be encouraged (where it would result in downward spiral and generate unproductive and detrimental results) : to what extent, therefore, should competition rules (within such a context) be respected? These also constitute further questions which this paper seeks to address.

ABSTRACT: The distributional implications of antitrust regulation imply a political cleavage between consumers and producers. I argue that the relative strength of these two groups depends on the level of democracy. In particular, an expansion of the franchise and competitive elections will increase the relative political weight of consumers, resulting in policies that favors their interests. An empirical implication of the argument is that the likelihood of effective competition policy reform increases with democracy. I test this proposition in two stages using an original dataset measuring competition agency design in 156 developing countries covering the period 1975-2007. First, I estimate hazard models on the timing of competition policy reform. Second, since “laws on the books” do not necessarily indicate a commitment to effective policy, I create an original index measuring governments’ commitments to antitrust policy. The index captures the independence of the agency, resource (budget and staffing) allocations, expert perceptions, and actual legal actions. The results of the empirical analysis support the proposition that democracy improves governments’ commitments to competition policy.

With the new academic year upon us, this is a reminder for anyone teaching antitrust/competition law or economics to recommend this blog to their students as a daily read to see the latest in scholarship in the field.

Competition Law and Intellectual Property Law: The Regulation of Innovation

About this course:

The course illustrates the connections among innovation policy, competition law and intellectual property (IP) rights and shows the way in which the law can work as a key instrument of innovation policy. The subjects covered include:

ABSTRACT: This article, written for the inaugural issue of a new journal, analyzes the extent to which the convergence of broadcasting and telephony induced by the digitization of communications technologies is forcing policymakers to rethink their basic approach to regulating these industries. Now that voice and video are becoming available through every transmission technology, policymakers can no longer define the scope of regulatory obligations in terms of the mode of transmission. In addition, jurisdictions that employ separate agencies to regulate broadcasting and telephony must reform their institutional structures to bring both within the ambit of a single regulatory agency. The emergence of intermodal competition will also place pressure on both telephone-style regulation, which protects against monopoly pricing and vertical exclusion, as well as broadcast-style regulation, which focuses on content and ownership structure! . It will also force regulators to rethink social policies such as universal service and public broadcasting. At the same time, it is possible that convergence will be incomplete and that end users will maintain more than one network connection, which would reduce the danger of anticompetitive activity and allow policymakers to stop short of forcing every connection to be everything to everyone. Lastly, the increase in traffic volumes associated with the advent of Internet video may require the deployment of multicast protocols, content delivery networks, and more aggressive traffic management, all of which potentially implicate the debate over network neutrality currently taking place in the U.S.

ABSTRACT: Spectrum auctions are used by governments to assign and price licenses for wireless communications. Effective auction design recognizes the importance of competition, not only in the auction, but in the downstream market for wireless communications. This paper examines several instruments regulators can use to enhance competition and thereby improve market outcomes.

ABSTRACT: Over the past two decades, the Internet has undergone an extensive re-ordering of its topology that has resulted in increased variation in the price and quality of its services. Innovations such as private peering, multihoming, secondary peering, server farms, and content delivery networks have caused the Internetâ€™s traditionally hierarchical architecture to be replaced by one that is more heterogeneous. Relatedly, network providers have begun to employ an increasingly varied array of business arrangements and pricing. This variation has been interpreted by some as network providers attempting to promote their self interest at the expense of the public. In fact, these changes reflect network providersâ€™ attempts to reduce cost, manage congestion, and maintain quality of service. Current policy proposals to constrain this variation risk harming these beneficial developments.

ABSTRACT: A key question facing regulators is how to create an economic environment that encourages appropriate investment and innovation. In this paper we analyze the importance of technological change for both competition and regulation, with a particular focus on the regulation of telecommunications and the Internet. We recommend that dynamic efficiency should be used as the appropriate benchmark for judging the effectiveness of different regulatory approaches. Contrary to conventional wisdom, we find that incentive regulation, such as price caps, is not particularly good at promoting dynamic efficiency. Neither is traditional cost-of-service regulation. As an alternative, we suggested that antitrust, judiciously applied, is likely to be better at promoting dynamic efficiency.

ABSTRACT: The Obama administration came into power championing a philosophical shift in regulatory and antitrust policy. The telecommunications industry was singled out by the administration as a case where past regulatory/antitrust policies may have been too permissive. Prominent policy issues slated for (re)examination include forbearance from network unbundling obligations, net neutrality regulation and prospective market failures in the provision of broadband. The principal objective of this article is to develop a set of competition and regulatory principles, firmly grounded in the law and economics literature, that can serve to inform the design of the optimal public policy for the telecommunications sector.

ABSTRACT: The U.S. Department of Justice and the Federal Trade Commissionare currently in the process of revising their Horizontal MergerGuidelines. I explain that if a revision is to occur, then thereare certain parts of the Guidelines that are most in need ofrevision, including the sections on unilateral and coordinatedeffects, committed and uncommitted entry, numerical concentrationthresholds for safe harbors, and fixed costs. I also explainwhat should not become part of any new Guidelines, such as replacingthe market definition/market concentration starting point witha competitive effects framework such as "upward pricing pressure."The proposed Guidelines were published in April 2010. I presentmy reactions to the proposed Guidelines and discuss severalcaveats that courts, foreign antitrust agencies, and the businesscommunity should be aware of as they try to interpret what theproposed Guidelines suggest about appropriate antitrust policy.

ABSTRACT: This article reviews the competition law regime in the television broadcasting sector in Hong Kong. This regime governs one of the only two sectors in Hong Kong subject to competition law enforcement until the government promulgates a cross-sector competition law. The article begins with an overview of the state of competition in the sector, highlighting trends in recent development that are relevant to competition law enforcement. This is followed by an examination of the two main competition provisions in the Broadcasting Ordinance and the guidelines issued by the Broadcasting Authority, the sectoral regulator. It argues that one of the greatest flaws in the provisions is their designation of the downstream market as the relevant market, hence exacerbating the limitations of a sectoral regime. The article continues with a critical review of the existing decisional practices, focusing on the regulator’s treatment of market definition, predatory pricing, and causation. It argues that the regulator has largely failed to apply rigorous analysis to these issues and has adopted an overly stringent standard for causation. It concludes with an analysis of a recent controversy in the sector - the dominant terrestrial broadcaster’s alleged imposition of exclusivity on artists, which prevent these artists from appearing on rival channels.

ABSTRACT: Slotting allowances are payments made by manufacturers to obtain retail shelf space. They are widespread in the grocery industry and a concern to antitrust authorities. A popular view is that slotting allowances arise because there are more products than retailers can profitably carry given their shelf space. We show that the causality can also go the other way: the scarcity of shelf space may in part be due to the feasibility of slotting allowances. It follows that slotting allowances can be anticompetitive even if they have no effect on retail prices.

There is a discussion of LLM competition law programs at the LLM Guide website. Aaron Edlin (Berkeley) and Ioannos Lianos (UCL) offer their analysis as to why the field is hot and what students should consider in a program.

ABSTRACT: Google Book Search (GBS) has captured the attention of many commentators and government officials, but even as they vigorously debate its legality, few of them have marshaled new facts to estimate its likely effects on publishing and other information markets. This Article challenges the conventional wisdom propounded by the U.S. and German governments, as well as Microsoft and other competitors of Google, concerning the likely economic impact of mass book-digitization projects. Originally advanced by publishing industry lobbying groups, the prevailing account of mass book-digitization projects is that they will devastate authors and publishers, just as Napster and its heirs have supposedly devastated musicians and music labels. Using the impact of GBS on the revenues and operating incomes of U.S. publishers believing themselves to be the most-affected by it, this Article finds no evidence of a negative impact upon them. To the contrary, it provides some evidence of a positive impact, and proposes further empirical research to identify the mechanisms of digitization’s economic impact.

The debate surrounding the GBS settlement is important to students, writers, researchers, and the general public, as it may decide whether a federal appellate court or even the U.S. Supreme Court allows the best research tool ever designed to survive. If the theory of Microsoft and some publishing trade associations is accepted, the courts may enjoin and destroy GBS, just as Napster was shut down a decade ago.

The Article aims at a preliminary estimate of the economic impact of mass digitization projects, using GBS as a case in point. It finds little support for the much-discussed hypothesis of the Association of American Publishers and Google’s competitors that the mass digitization of major U.S. libraries will reduce the revenues and profits of the most-affected publishers. In fact, the revenues and profits of the publishers who believe themselves to be most aggrieved by GBS, as measured by their willingness to file suit against Google for copyright infringement, increased at a faster rate after the project began, as compared to before its commencement. The rate of growth by publishers most affected by GBS is greater than the growth of the overall U.S. economy or of retail sales. Thus, the very publishers that have sued Google have seen their revenues grow faster than retail sales or the U.S. economy as a whole (measured by gross domestic product). This finding parallels some of the research that has been done since the Napster case on the economic impact of peer-to-peer file sharing on sales of recorded music. Future studies may provide a more granular estimate of the economic impact of frequent downloads or displays of pages of particular books on the sales of such books.